"Historically, there is no clear evidence that general elections in Singapore impact the local stock market in any meaningful and lasting way," says Menon, citing results from the past three general elections in 2011, 2015 and 2020.
All three elections barely made a mark on the benchmark Straits Times Index (STI) and "no meaningful and lasting impact on the performance of the local bourse", he notes.
Instead, global developments and fund flows have made a bigger impact on the Singapore Exchange(SGX) compared to local elections due to Singapore's small and open economy. How the global economy and capital markets perform will have a bigger impact as to how local equities will perform, Menon adds.
"At this juncture in Singapore and many other Asian economies, investors are focused on US President Trump's trade policies and the impact this will have on the US and global economic outlook," he writes. "This is likely to be the key driver of the local and regional bourses for now, more so than Singapore's general election outcome."
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While Menon, in his May 4 note, believes that the Singapore market could enjoy gains on Monday with the ruling party's strong performance and Wall Street's rally on Friday (May 2), the STI climbed by some 2.5 points to 3,847.648 points on Monday (May 5) from Friday's close.
"How the Singapore stock market performs in the coming weeks and months will still depend more on global factors, especially Trump's trade policies, and how the global economy reacts to tariff threats with recession fears lurking in the background," he stresses.
Elections or not, the Singapore bourse remains "attractively valued" with the current P/E ratio of the STI cheaper relative to its history.
See also: Singapore SMEs grapple with costlier, scarcer financing
"Based on consensus earnings forecasts, the STI is currently trading at a forward 12-month P/E ratio of 11.7 times, which is nearly one standard deviation below the 10-year average," Menon writes. This is compared to global equities based on the MSCI All Country Global Index trading at a "much higher" P/E ratio of 17.5 times.
STI's dividend yield of 5% is also attractive and the highest among its Asian bourses, Menon adds.
"These are some reasons why we are positive on the outlook for Singapore equities and why we have an overweight position on the market in our asset allocation calls," he says.
"Year-to-date, the STI is 1.52% in local currency terms. However, when measured in the US Dollar terms versus the benchmarks of other Asian bourses, the STI ranks amongst the top performer with a 6.7% gain."
PAP government to balance providing immediate economic support, says DBS
Following its decisive win at this year's general elections, DBS Group Research's senior economist, Chua Han Teng, believes the Singapore government will first focus on providing immediate economic support. The government may also prioritise fostering growth and addressing rising social needs in the long term, he adds.
To Chua, the strong mandate reflects the public's confidence in the fourth-generation leadership led by Prime Minister Lawrence Wong. Furthermore, the result will reassure investors of Singapore's ongoing political stability and policy continuity.
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With jobs among the key issues of the general elections and with uncertainties stemming from the higher global tariffs, Chua foresees the government issuing targeted fiscal support for businesses and workers, complementing the monetary policy easing in January and April this year.
"Measures will likely prioritise local small and medium-sized enterprises (SME) with lesser resources and greater constraints, and especially those engaged in goods exports business, which will be particularly vulnerable to the direct and indirect impacts of US tariffs," he writes in his May 5 report.
For SMEs, Chua sees near-term support areas such as easing cash flows, improving access to funding, and managing manpower needs/costs to retain workers.
Referring to Minister for Manpower Tan See Leng's remarks in April, the economist believes the government could provide traineeship support to help first-time job seekers and mid-career workers remain relevant, and enhance safety nets in case of increased layoffs.
Singapore's labour market posted the slowest overall unemployment growth in 1Q2025 since 3Q2021, with a slight increase in unemployment rates in March 2025 compared to December 2024.
"We think that business hiring and wage increment expectations could weaken further amid a cyclical economic growth slowdown," Chua notes. "Business sentiments are turning down."
The economist adds that he expects to see weaker economic growth in the second half of 2025 as "deteriorating external demand from higher US-led global tariffs will likely hurt Singapore's trade-related sectors, with downside risks to our 2025 GDP growth forecast of 2.0%".
"Given the significantly weakened external demand outlook, the Ministry of Trade and Industry downgraded its 2025 growth projection range to 0.0-2.0% (from 1.0-3.0%) in April 2025," he points out.
Singapore should still continue to attract FDIs in uncertain environment
In the longer term, the government will continue to grow the economic pie with an average growth goal of 2% to 3% per annum over the next decade, Chua notes from Wong's Budget 2025 speech. Singapore will also aim to maintain its open economy and commit to a stable and rules-based global system amid a retreat from globalisation led to an inward US.
Beyond political stability and Singapore remaining open, Chua believes Singapore will continue to be a "stable and trusted investment destination amid its continued efforts to "ensure strong rule of law, favourable business environment, access to skilled talent, and high infrastructure connectivity".
"These positive factors should continue to attract foreign direct investments (FDI), having supported robust long-term capital flows on average across the past four election cycles," Chua writes.
In addition, sustained FDI by anchoring foreign-owned firms in Singapore would benefit the country in several ways, including securing long-term economic growth, creating job opportunities, sustaining continued real income growth and generating fiscal resources needed for increased social spending under the Forward Singapore (Forward SG) agenda, the economist says.
Social development expenditures may increase in coming years
With the PAP retaining its parliamentary majority, Chua expects that the government will continue its Forward SG initiatives.
"With an expected total allocated government spending of close to $40 billion by the end of this decade (as announced in Budget 2024), Forward SG focuses on refreshing the social compact by improving Singaporeans' well-being and enhancing assurances in areas like healthcare, education, and housing - also the top government social development expenditure categories," Chua says.
To this end, the Singapore government is likely to increase its spending on social development in the years ahead. In FY2021 to FY2025, social development expenditures have increased to reach an average of 7.6% of Singapore's GDP, Chua notes.
